Sunday, March 10, 2013

Mounting Evidence: Obamacare Insurance Plans Will Be Bare Bones — and Expensive

Scott Gottlieb explains (My bold)
The Obamacare plans won't be cheap.

Quality of coverage is just one issue. Price is the other. There's mounting evidence that even though the new health coverage will be austere, it'll still be pricey.

Health plans have ample incentives to price the Obamacare coverage high, which is precisely what they're likely to do.[...] health plans want to reduce uncertainty around how all the risk-sharing provisions in Obamacare will eventually play out. The legislation puts in place mechanisms that forces Washington to share with health plans some of the cost of the covering the sickest beneficiaries. But the regulations outlining these parameters were only released last Friday. Nobody yet trusts how they'll work.

To mitigate uncertainty, plans will price their products high. Insurers know that any excess profits they earn will have to be paid back to the government, anyway (owing to caps that Obamacare places on how much profit health plans can earn). Health plans are better off aiming high, and owing money back, then getting underwater.[...] health insurers will want to reduce the incentive for employers to drop coverage and dump employees into the exchanges. This is especially true when it comes to insurers' lucrative small group and large group segments.

If insurers price the exchange products too low, they'll give employers another inducement to do this sort of dropping. By pricing exchange products higher relative to the insurance offered in the private market, they reduce this incentive.[...]

Since the Obamacare plans are likely to pay providers less than rates offered by standard private coverage (and maybe even less than Medicare rates) many doctors could also refuse to accept Obamacare, just like they refuse Medicaid. Or refuse to offer insurers discounts for these patients.

The architects of Obamacare designed the scheme without much thought to how its overlapping incentives would discourage competition on the price of the new coverage. Health plans will try to drive down costs by offering very narrow networks of providers that they can more easily control. It will be a race to the bottom to see which plan can offer the cheapest benefit, while still meeting minimum standards. But it won't be a race to the bottom on price.
The real danger here may be if doctors do refuse to see Obamacare patients. If that happens to any significant degree, the possibility that doctors, down the road, will be forced to take Obamacare patients seems like the next interventionist step. Then we will all be in long lines, waiting for low quality care.


  1. Why would the high vs. low cost of health exchange plans matter for an employer intent on saving money by dropping the health insurance benefit? It may make a difference in the dissatisfaction of their employees.

    The key for the employer seems to be the size of the penalty.

    1. It would make a difference for a small businessman. I recently posted about a small businessman who dropped an old program and saw his premium triple.

      Same thing seemed to happen, in some fashion, to Donna Brazile.

      The devil seems to be in the details. Since, Obama is in bed with big insurance, the idea that incentives will go toward higher premiums and less benefits makes sense. The early anecdotal evidence seems to confirm this. I haven't heard any healthy person yet that has to pay for his insurance, as opposed to having it government subsidized, say, "Wow my premiums dropped and my coverage expanded."

  2. Health exchanges will offer individual plans from private insurers. People buy individual plans today from Blue Cross/Blue Shield, UnitedHealth, WellPoint, Aetna, UnitedHealth, Cigna & Humana.

    This notion that Obamacare plans are somehow separate and identifiable for physicians to refuse seems uniformed.

    Providers are counting on caring for more insured patients, especially in states with high rates of uninsured patients.

    The question is how a doctor should spend his or her time. As most physicians are now employed, a corporate entity will decide which plans to sign and which to not.

  3. I don't think this bill was ever intended to be a solution, it was meant to be a stepping stone. That's because in the current America, it would not accept Single Payer, that is, Socialist Health Care.

    If, however, a bill could be crafted that was so bad that by comparison, Single Payer Health Care would look preferable... So preferable that it would even have us begging for it...

    Yep. Now I see clearly.

    1. Yep, and it ain't a bright bright sunshiny day. :(

  4. I enjoyed reading & I must say that I was very impressed with your writing skills. Keep up the good work it's very refreshing to see someone like you :)